What effect will Brexit have on the UK property market
It’s official, the UK has voted to leave the European Union. We’ve had a couple of weeks to let it sink in and now we are all left thinking about what’s to come. The decision to leave is one that will undoubtedly have a effect on the property market.
In the short-term, the only certainty is uncertainty. Yes, initially there may be a decrease in activity both from less houses coming on to the market and buyers having a ‘wait and see' attitude. That is the safe play in times where there are still so many unknown variables.
But time will pass, and is it all really doom and gloom? We know from experience, the property industry is robust. After all it picked itself up after a recession eight years ago. The Governor of the Bank of England, Mark Carney said last week, “The question is not whether the UK will adjust, but rather how quickly and how well.” At the end of the day, whether it is for work, family or studying, people will still need to move home.
So what do we know?
The economy and the housing market are both affected by levels of public sentiment and confidence. A strong economy encourages a strong property market and a strong property market stimulates a confident economy. These confidence levels are influenced by three factors:
People are bound to feel insecure in the short-term until everything settles down. Insecurity has an effect on activity levels and people will not buy if they fear losing their jobs or homes. However, it is worth noting that across the UK during the last recession there were significantly less repossessions than initially predicted, and the economy is in a much stronger position now than it was then.
If property prices are holding steady, it has the potential to instil confidence back to the market. Adam Tyler, chief executive of the National Association of Commercial Finance Brokers is one person who stands by this view, he said: “Market fundamentals still look sound and the sharp imbalance between supply and demand will prevent a material decline in prices.” Confidence in the market around the north of the country may be higher. The latest figures show a significant difference of £169,000 between average prices in the north and south with the average home in London valued at a whopping £472,000.
Mortgages and interest rates
What will the banks do to their mortgage and interest rates? A recent poll by Reuters found that 17 of the 26 economists questioned believed that the Bank of England would likely cut interest rates if Britain decided to leave, meaning there would be less money to pay back on any loans. Mark Carney, Governor of the Bank of England has stated that interest rates are likely to be cut in the wake of Brexit. The rate which has currently been 0.5% for 7 years could lower even further as part of a contingency plan to safeguard the financial system.
This announcement came in reaction to the worst dip in the pound for 30 years. The depreciation of the pound highlights a discount for oversees investors, with property prices in some of London’s prime areas up to 20 per cent cheaper in US dollar terms in the space of a week.
To see the longer term effect of the decision it is a waiting game. What we can report is that we are still receiving high levels of enquiries from buyers undeterred by the decision to leave and the level of valuations and instructions for sale has remained the same.
If you would like more information on the property market in your area, or to arrange a no obligation appraisal of your property, contact your local homes4u branch